Two suicide bombers ripped through a busy market area in central Baghdad Saturday, shattering a relative lull in attacks in the capital and dampening preparations for New Year celebrations.

The bombers attacked the al-Sinek area, killing at least 27 people and wounding 53, a police colonel said. An officer in the interior ministry and a hospital official confirmed the toll.

"Many of the victims were people from the spare parts shops in the area, they were gathered near a cart selling breakfast when the explosions went off," said Ibrahim Mohammed Ali, who owns a nearby shop.

Torn clothes and mangled iron were strewn across the ground in pools of blood at the site of the wreckage near Rasheed street, one of the main thoroughfares in Baghdad, an AFP photographer reported.

"Twin terrorist attacks were carried out by suicide bombers in al-Sinek neighbourhood," an official from Baghdad operations command told AFP.

The targeted area is packed with shops, workshops and wholesale markets and is usually teeming with delivery trucks and daily labourers unloading vans or wheeling carts around.

The attack was claimed by the Islamic State jihadist group via its propaganda agency Amaq, which reported the "martyrdom operation" in Al-Sinek neighbourhood.

Baghdad has been on high alert since the start on 17 October of an offensive, Iraq's largest military operation in years, to retake the northern IS-stronghold of Mosul.

IS has tried to hit back with major diversionary attacks on other targets across the country but has had little success in Baghdad. Saturday's twin bombings were the deadliest in the capital since the start of the Mosul offensive.

At least 34 people were killed when a suicide bomber blew himself up in a funeral tent in Baghdad's Shaab area on 15 October.

Huge crowds were expected to gather on Saturday evening in the streets of Baghdad to celebrate the New Year for only the second time since the lifting in 2015 of a years-old curfew.

Last year revellers poured into the streets of Baghdad for celebrations that lasted most of the night despite an already tense security backdrop.

Iraqi Prime Minister Haider al-Abadi had vowed earlier in 2016 that his forces would rid the country of IS by the end of the year, but the Mosul operation has been slower moving that expected.

This week he told a televised news conference that Iraqi forces would now require at least another three months.

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